Home Prices Increased in August But the Slowdown Was Apparent

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U.S. home prices increased 0.3% on an adjusted basis in August compared with July and were up 3.2% compared with August 2018, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index.

But the ongoing slowdown in home price appreciation was apparent, particularly when looking at the report’s 10-city and 20-city composites, which measure the average home price in the most populous cities in the U.S. 

Month-over-month, the index’s 10-city composite decreased 0.1% while the 20-city composite decreased 0.2%.

Year-over-year, the 10-city composite increased 1.5% while the 20-city increased 2.0%.

On an unadjusted basis, home prices increased 0.2% in August compared with July.

The 10-city and 20-city composites were flat, on an unadjusted basis, compared with the previous month.

Phoenix, Charlotte and Tampa reported the highest year-over-year gains among the 20 cities. Phoenix led the way with a 6.3% increase, followed by Charlotte at 4.5% and Tampa at 4.3%.

Philip Murphy, managing director and global head of index governance at S&P Dow Jones Indices, notes that “a shift in regional leadership may be underway” with regard to home price growth in the major markets.

“Phoenix saw an increase in its [annual] price change to 6.3 percent and retained its leading position,” Murphy says in a statement. “However, Las Vegas dropped from number two to number eight among the cities of the 20-city composite, falling from a 4.7 percent [annual] change in July to only 3.3 percent in August.

“Meanwhile, the Southeast region included three of the top four cities,” Murphy says. “Charlotte, Tampa and Atlanta all recorded solid [annual] performance with price changes of 4.5 percent, 4.3 percent and 4.0 percent, respectively.

“In the Northwest, Seattle’s [annual] change turned positive after three consecutive months of negative [annual] price changes,” Murphy continues. “The 10-city composite [annual] price change declined slightly from July to 1.5 percent, while the 20-city composite [annual] price change remained steady at 2.0 percent. San Francisco was the only city to record a negative [annual] price change.”

Ralph McLaughlin, deputy chief economist and executive of research and insights for CoreLogic, says low mortgage rates are currently propping up home prices.

“This month’s [home price] report brought us the first sign that lower mortgage rates might be prolonging a housing market expansion that might otherwise be in its waning months,” McLaughlin says in a statement. “Though the decision to purchase a home is dependent upon a much broader set of criteria than interest rates, in today’s supply- and affordability-constrained market, they perhaps matter more than they have in the past.

“When housing is inexpensive, homebuyers may not be mortgage rate sensitive because changing rates have little impact on the marginal buyer’s ability to qualify for a mortgage,” McLaughlin says. “However, when housing is more expensive – such as in today’s market – rapidly falling mortgage rates allow more buyers on the sidelines to qualify for a mortgage, thus boosting short-run demand and allowing price growth to again turn upwards.”

As such, “persistently low mortgage rates have seemingly ended what might have otherwise been a home price race-to-the-bottom this late in our economic expansion,” McLaughlin adds.

“Mortgage rates this low at the end of an economic cycle is nearly unprecedented, and may be very well keeping the housing market – and U.S. economy – afloat,” he says.

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